Labels raise iTunes price pressure

The world's largest labels are turning the screws on Apple in an attempt to force iTunes prices to rise - but will it be pirates or labels who benefit from such a move?

by
Macworld staff
, | 03 Apr 06

The world's largest labels are turning the screws on Apple in an attempt to force iTunes prices to rise.

Apple is understood to be resisting these attempts, which are taking place as Apple and the labels renegotiate their distribution agreements.

An Associated Press report cites Ipsos Insight analyst Matt Kleinscmit, who says: "The labels really want to be able to boost up the price for downloads on new releases."

The background is complicated. Apple CEO Steve Jobs has damned label bosses for being "greedy".

Musicians counter-argue that all music is not the same - some music is timeless, and artists that make longer (but fewer) tracks than others effectively face a tacit financial penalty.

Muddying the issue is New York Attorney General Eliot Spitzer and the US Department of Justice who are conducting separate investigations into digital music prices. They are concerned the majors have colluded to set price.

However, with sales of music in physical formats continuing their steep decline, labels must ask themselves if they can afford to sacrifice the 80 per cent of digital music sales Apple supplies.

And with the omnipresent threat of music piracy to contend with, they also need to beware they don't force prices higher than consumers will happily pay.

"We can throw variable pricing in and we can raise prices of a hit song, but it doesn't mean consumers will buy," Needham & Co analyst Charles Wolf told Associated Press. "They have an alternative - get songs for free."